SpareBank update on Africa Energy

SpareBank published on Friday an update on Africa Energy:

Africa Energy / Panoro – Important wells ongoing

During 2022, Africa Energy (27.5% interest) and Panoro (12.5% interest) plan to drill the Gazania well in the Orange Basin South Africa. Currently, there are two wells drilling in the Orange Basin in Namibia, on the other of the South African border: The Shell operated Venus well and the Total operated Graaf well. Upstream just published an article stating that “Shell hits oil in closely-watched Namibian wildcat”, but that is “…it is too early to say if commercial volumes have been found.” The update is positive for Africa Energy and Panoro as these two companies will drill the Gazania well in the Orange Basin South Africa. Any discovery in the Orange Basin may bring more attention to the region and is positive for the Gazania prospect in Block 2B. In the scenario of a commercial discovery within the pre-drill resource range on Gazania, we estimate a potential NAV uplift of SEK 1.3/share (25% of current NAV) and NOK 7-8/share of for Panoro (15-17% of current NAV). Admittedly, a key risk factor for the Block 2B is that the licence matures in November 2022, which means that the partners need to secure a rig soon.

Africa Energy / Panoro – Azinam acquired by Eco Atlantic, positive for progress of drilling of Gazania prospect

As highlighted in our update below, we expected a structural change in the 2B licence partnership. Eco Atlantic, an E&P with focus on Atlantic Margins in Guyana and South/West of Africa, just announced an acquisition of 100% of Azinam. Azinam is controlled by Seacrest Capital Group and is the operator of Block 2B. The consideration is 16.65% equity stake in the enlarged Group Eco Atlantic + Azinam, implying a deal value of around USD 11-12m on our estimates. For Africa Energy and Panoro, the deal is positive as it brings in a financially stronger partner and it reduces the timing risk for the Gazania well. In the scenario of a commercial Gazania discovery within the pre-drill resource range on Gazania, we estimate a potential NAV uplift of SEK 1.3/share (25% of current NAV) for Africa Energy and NOK 7-8/share of for Panoro (15-17% of current NAV).


My comment

SpareBank emphasises need to contract a rig for 2B soon. See my Minutes of the call with Garrett Soden, Africa Energy CEO published here last week. Rig timetable included there. Expect the announcement within the next 2-4 weeks. should be a major catalysts.

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